New ways to engage customers in co-designing your company's future - a weblog to complement the book, Outside Innovation, by Patty Seybold

Description

What is Outside Innovation?

It’s when customers lead the design of your business processes, products, services, and business models. It’s when customers roll up their sleeves to co-design their products and your business. It’s when customers attract other customers to build a vital customer-centric ecosystem around your products and services.
The good news is that customer-led innovation is one of the most predictably successful innovation processes.
The bad news is that many managers and executives don’t yet believe in it. Today, that’s their loss. Ultimately, it may be their downfall.

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Observations

LEAD USERS

Eric von Hippel coined the term "lead users" to describe a group of both customers and non-customers who are passionate about getting certain things accomplished. They may not know or care about the products or services you offer. But they do care about their project or need. Lead users have already explored innovative ways to get things done. They're usually willing to share their approaches with others.

LEAD CUSTOMERS

I use the term "lead customers" to describe the small percentage of your current customers who are truly innovative. These may not be your most vocal customers, your most profitable customers, or your largest customers. But they are the customers who care deeply about the way in which your products or services could help them achieve something they care about.

LEAD CUSTOMERS AND LEAD USERS

We’ve spent the last 25 years identifying, interviewing, selecting, and grouping customers together to participate in our Customer Scenario® Mapping sessions. Over the years, we’ve learned how to identify the people who will contribute the most to a customer co-design session. These are the same kinds of people you should be recruiting when you set out to harness customer-led innovation.

HOW DO YOU WIN IN INNOVATION?

You no longer win by having the smartest engineers and scientists; you win by having the smartest customers!

CUSTOMER CO-DESIGN

In more than 25 years of business strategy consulting, we’ve found that customer co-design is a woefully under-used capability.

April 21, 2011

Kudos to Apple

Apple’s outstanding financial results reported on April 20, 2011 simply confirmed what most of us already know: Apple has become the center of gravity in the tech world. Every technology player wants to emulate or align with Apple. Apple products rock. The Apple retail and end-user experiences make your bones melt (that’s a frequently-used metaphor in romance novels!).

Revenues for the quarter were $26.7 billion, up 83%. Profits were $6 billion, nearly double! And this in a post-holiday, post-consumer binge digestion quarter.

Undervalued Stock?

But Apple’s stock price did not rise appreciably. Why is Apple’s stock so undervalued? I believe that concerns over Steve Job’s mortality is baked into the discounted P/E ratio.

Horace Dediu @Asymco is the best analyst in the mobile/high tech world, bar none. His analysis is published free to all. And, unlike most self-absorbed pundits, he’s ruthless in evaluating his own track record.

“At last night’s closing price Apple was trading at a P/E of 16.3. Excluding cash, that ratio was at 13. On a conservative forward basis (my estimates) the stock is priced at less than 10 times next twelve months’ earnings.

These figures show a remarkable pessimism that has persisted around Apple for years. It was slightly, but not much, worse during the great recession. It persisted whether the company was growing at 30% of, as now, 95%.

There are many hypotheses about why Apple’s earnings and growth are considered worthless. They come and go with the whims of the age: recession, elitist, luxury branding, health issues, macro “headwinds”, earthquakes, phantom competition.

Lately it’s become fashionable to blame Android….

Since Apple is trading at a fraction of (a) historic multiple (b) multiple based on growth (c) comparable companies’ multiples then we can assume that a “normal” valuation would be twice the current (i.e. a multiple of about 32). That would still be a discount to growth and history but it would begin to match some of the comparables. A doubling of the P/E would be a good start.

But a multiple of 32 would imply a doubling of market cap, which means that the Android hypothesis is causing the evaporation of about $300 billion in future profits. So it stands to reason that it’s responsible for a $300 billion destruction of Apple shareholder value.

That’s an interesting number since Google itself is only worth about $169 billion.

The measurement then presents a remedy: If Apple bought Google (it already has a third of its value in cash) and it shut down Android, it could create $300 billion in value. IT could even throw away all of Google and still walk out with a profit.

Seems like a great bargain.”

~ Horace Dediu

This is wonderful tongue in cheek analysis, Horace!! (Or could it come to pass?)

Personally, I think Steve Jobs may be one of the only founders who probably likes the fact that Apple stock is undervalued. If customers love your products and your experience and throw money at you, and you have enough cash flow to do anything you want, why does the stock price matter?

Irrational Reaction to a Broken Computer

I should be annoyed. My MacBook Pro died two weeks after its three-year warranty expired. Instead, I was delighted to have an excuse to treat myself to a shiny NEW MacBook Pro. (That’s the irrational part! When you are so in love with a company’s products that you can’t wait for it to fail so you can rationalize buying a new one!)

Hats Off to Time Machine!

I was also startled by how seamless it was to restore (almost) everything from my old machine to my new one using Apple’s Time Machine backup software. I’ve tried other back up services before. I use Dropbox in the cloud. I have lots of stuff stored on Amazon’s EC3, as well as a new Amazon personal cloud back-up. With all of those, you can download and recover your files. But the magic of Time Machine is that you have all of your applications, profile settings, and all of your files. Your last machine just reconstitutes itself on your new machine. You can just “move in” to your new machine. Since I had an older operating system on my previous Mac, a few of the apps complained because the newer OS required an application upgrade. The only things that didn’t work well were those that I excluded from my Time Machine backups (and the files that I hadn’t backed up because I didn’t keep Time Machine running all the time, but rather took weekly snapshots—lesson learned!).

Time Machine in the Cloud?

As I was thinking about what I’d really like to have for automated back up, I realized that it would be a combination of Time Machine (with the security of having everything backed up on a local drive) AND my entire “machine” encrypted in the cloud. Sure enough, that’s what Dolly Drive does.

I found a review of Dolly Drive by googling “Time Machine in the cloud” and I found this review by Dave Caolo, here’s an excerpt:

“… .First, it allows Time Machine to behave just like Time Machine. The primary difference is that your backups live out in the cloud instead of locally…. Next, Dolly Drive offers the security of being able to back up from almost anywhere…. The third interesting part is cloning…. Most of us have been using Time Machine to back up to a local drive … Dolly Drive doesn't want to abandon that drive. In fact, the app will create a local duplicate, or even duplicate your OS, creating a bootable external.…solution.”

So naturally, I signed up! The only downside I see with Dolly Drive in practice is that this is a service Apple is highly likely to offer as it rolls out its cloud strategy. Maybe Apple will just buy Dolly Drive. Apple certainly has enough cash lying around!